Tag Archives: political economy

Define “Fair”

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Some think the mortgage interest deduction from our income taxes is unfair. After all, says one such,

I can easily construct a situation in which a taxpayer essentially enjoys no [mortgage related] tax benefits whatsoever. How about the single individual or possibly a married couple without children, who make just enough to make ends meet but still cannot save to buy a house? Or possibly, they prefer renting to the onerous commitment of home ownership. There doesn’t appear to be any tax breaks for them.

Although this person offers no definition of “fair” whatsoever, she seems to think that “fair” means everyone gets the same benefit, even though by her own construction, they’re not in the same situation as those who’ve “earned” that benefit. Because, equal outcomes.

One gets this grade on an assignment, another gets that grade, that’s unfair? One gets a first place prize in a contest and another doesn’t, that’s unfair? One earns more money than another, that’s unfair? One has a more fortunate endowment of work ethic, talent, luck, than another, that’s unfair? One made better use of his equal opportunity and so becomes better off than another, that’s unfair? How, exactly?

Of course, this particular question easily could be begged with a proper reform of our tax code, a reform that brings us to a single flat rate with no deductions, credits, etc. What is truly unfair is using our tax code for social and economic engineering and thereby picking winners and losers by government fiat rather than by actual performance and merit.

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Keep in mind that the sole purpose of taxes under our Constitution is to fund the government, not to control how free men interact with each other in a free market, not to say, “This is a worthy enterprise, but that is not.”

“Inversions”

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US corporate income is taxed at the highest rate in the world. “Inversion” is the process of American companies packing up, usually through merger with foreign entities, and reincorporating (if not physically relocating) in a foreign country in order to avoid US corporate income taxes.

Treasury Secretary Jacob Lew wants the inversions stopped. Writing to the Senate and House tax-writing committees, he said he said those two bodies “should enact legislation immediately…to shut down this abuse of our tax system.”

His letter went on:

What we need as a nation is a new sense of economic patriotism, where we all rise or fall together. We should not be providing support for corporations that seek to shift their profits overseas to avoid paying their fair share of taxes.

Prior to that,

the Obama administration in its budget…proposed tightening the rules to substantially limit inversions.

Of course, it’s utterly inconceivable to this administration that the abuse is our tax system itself. It’s utterly inconceivable to this administration that what is patriotic is lowering tax rates.

More fully, and contrary to the nonsense Lew is spouting, the proper tax action for preventing inversions is to lower corporate income, and related, taxes so as to remove the incentive to go overseas in the first place. Lowering the current rate to 20% would be a good start, especially if done with a view to eliminating corporate income, and related, taxes altogether in just a couple more years.

I’ll ignore, for now, the New Nationalism, Teddy Roosevelt Progressivism in Lew’s letter.

The Wrong Question

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Jim Angle, of Fox News, usually does better than this.

“Right now the savings that was projected to pay for all this spending [on Obamacare] is not being collected as originally projected,” said Charles Blahous, of the Mercatus Center. He estimated the law will eventually cost $200 billion a year by 2020.

And

“There was about $100 billion that was supposed to come in over the next 10 years from penalties on individuals, if they did not carry health insurance, penalties on employers, if they do not offer health insurance, and to date, those penalties have not been enforced,” Blahous said.

The law also counted on more than $700 billion in cuts to Medicare, including up to $150 billion in cuts to Medicare Advantage, but the president set those aside at the behest of Senate Democrats who feared angering seniors in an election year.

It’s gotten so bad that the CBO will no longer do estimates on Obamacare’s costs, Angle cites American Enterprise Institute’s Joe Antos as saying.

But then Angle goes astray:

The changes, and the overall uncertainty regarding the price tag, are raising concerns about whether the law even has enough revenue coming in to pay for the program.

This is the wrong question. The delays and alterations illustrated above show the essential capriciousness of any government effort—not just the present administration’s effort; this one is only the most active—at emulating a private business arrangement. This law shouldn’t have any revenue coming in to pay for it. This should be a private enterprise matter, with private enterprise raising the money for its private enterprise endeavor—or the endeavor fails, because the free market—American citizen participants—don’t want it. The law shouldn’t exist.

A Thought on a European Polity

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I wrote about this a bit ago. Daniel Hannan, Conservative Party MEP for South East England, has a more recent thought.

Churchill [as early as 1946] makes clear that this United States of Europe should not include Britain:

There is already a natural grouping in the Western Hemisphere. We British have our own Commonwealth of Nations. Why should there not be a European group which could give a sense of enlarged patriotism and common citizenship to the distracted peoples of this turbulent and mighty continent and why should it not take its rightful place with other great groupings in shaping the destinies of men?

In case anyone had missed the point, Churchill ended with a call for Britain and the Commonwealth, along with the United States and perhaps even Russia, to “be the friends and sponsors of the new Europe, and champion its right to live and shine”.

Hannan and a number of his fellow Center-Right MEPs are working out the details of a new proposal to achieve that:

a European Common Market—a lightly but effectively regulated free trade area, stretching from Iceland and the Faroe Islands to Turkey and Armenia—within which a smaller group of states could form a political union without prejudice to the non-participants.

At this point, it’s a long shot, but today is different from 1946. There’s a better chance. I say good luck to Hannan and his fellows.

Another Thought on Immigration

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Gordon Crovitz, in a recent Wall Street Journal op-ed, pointed out some statistics.

The Congressional Budget Office last year estimated that legalizing the 11 million undocumented immigrants would boost federal revenues by $48 billion over 10 years while costing $23 billion in public services. Adding more skilled workers would bring in $100 billion over a decade, mostly from increased income taxes.

In addition to this, I add (and reiterate) immigrants start more businesses than Americans who’ve been here for two or three or more generations. Those businesses employ people, and more so than “just” immediate family members.

There’s also the demographic question: the Unites States has only just returned to a birth rate that even barely replaces our death rate. We need immigration for continued population growth; we don’t want to face the population implosion risk from aging that Russia, the People’s Republic of China, the Federal Republic of Germany, France, and lots of other nations are facing. When Social Security was enacted, there were seven workers to contribute to the SS payments for every retiree, and that retiree had a retired life expectancy of some five to seven years. Today there are three workers per retiree, and that retiree has a retired life expectancy of nearly fifteen years. If we don’t intend to change the structure of Social Security, we need immigration.